Toyota Motor Corporation

Organisational Information

Toyota Motor Corporation (Toyota) is the largest producer of automobiles in Japan and the world's
second largest automotive manufacturer based on production and sales. In 2005, Toyota sold 7.4
1
million vehicles. Toyota's diversified operations include financial services, telecommunications, pre-
fabricated housing, and leisure boats.

Toyota was first established in 1937 as a spin-off from Toyoda Automatic Loom Works, one of the
world's leading manufacturers of weaving machinery. The patent rights to one of the machines was
sold and provided the seed-money for the development and test-building of Toyota's first automobiles.

Besides its 12 plants and a number of manufacturing subsidiaries and affiliates in Japan, Toyota has
52 manufacturing companies in 27 countries, which produce Lexus- and Toyota-brand vehicles and
components. Toyota employs approximately 285,900 people worldwide, and markets vehicles in more
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than 170 countries. The company is headquartered in Tokyo, Japan and had an operating income of
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approximately US$16 billion for 2006.

Toyota did not actively engage in the data collection process for the 2006 Global Accountability
Report. Indicators were therefore scored based solely on public information and data collected from
independent experts and stakeholders of the company.

Transparency | Participation | Evaluation | Complaint and Response

Organisational Structure

As with all other corporations, the governing body of Toyota is the General Meeting of Shareholders,
which is convened in June of each year. Only those shareholders that own above a certain threshold
of shares may attend and vote at the General Meeting.

Toyota’s executive body is the Board of Directors. This is composed of a total 25 Directors that
include the Chairman, Vice Chairman, President, 8 Executive Vice Presidents, 12 Senior Managing
Directors, an Honorary Chairman, and Senior Advisor. None of these are independent directors.
There are four committees that feed into the Board, including the Labour-Management Council, the
Corporate Philanthropy Committee, the Stock Option Committee, and the Toyota Environment
Committee.

Transparency Dimension

Toyota rank eighth among the ten assessed corporations for their transparency capabilities with a
score of 15 percent.

Toyota does not have an information disclosure policy; however, they do make a general commitment
to company-wide transparency in two key policy documents. In the Toyota Code of Conduct they
state "[i]n order to become an 'open company' and win the trust of society, Toyota strives to
communicate accurately and timely information to its stakeholders through active public relations and
public dialogue, so as to enhance its corporate image and transparency….” And in Toyota's
Contribution towards Sustainable Development, they state "…we will endeavour to build and maintain
strong relationships with our stakeholders through open and fair communication". In neither of these
documents however, does Toyota identify how they are going to translate these general commitments
into practice. In this respect, the policies lack good principles such as committing to respond to all
information requests within a certain period of time and making a commitment to full transparency
other than when a set of narrowly defined conditions apply (e.g. contractual confidentiality, staff
issues etc).

1
2005 Annual Report
2
2006 Toyota Up Close http://www.toyota.co.jp/en/pdf/2006/toyota_up_close0611.pdf
3
2006 Annual Report http://www.toyota.co.jp/en/ir/library/annual/pdf/2006/ar06_e.pdf
The Information Disclosure Committee oversees company-wide transparency at Toyota. The officer
responsible for the accounting division chairs this group. Based on publicly available information, no
evidence was found to suggest that Toyota provides training to staff on how to comply with the
company’s transparency commitments or that they disseminate the Code of Conduct through more
than one medium. Additionally, the Code of Conduct was found to be available only in English and
Japanese.

Toyota is also one of only two organisations assessed in the 2006 Global Accountability Report that
do no have a function on their website that allows stakeholders to contact the organisation.

Participation Dimension

Toyota’s participation capabilities rank ninth among the ten assessed corporations with a score of 31
percent.

External Stakeholder Engagement

Based on publicly available information, Toyota does not have a specific policy on external
stakeholder engagement. There is a section, however, on engaging stakeholders in the Toyota Code
of Conduct that identifies the principles that should underpin the company’s relationship with different
stakeholder groups. The Code of Conduct states: "Toyota listens to and respects its stakeholders'
criticisms and suggestions, and incorporates these as appropriate into its business." The Code does
not meet any of the good practice principles on stakeholder engagement; for example, it does not
identify the conditions under which stakeholders can expect to be involved in corporate decision-
making, nor does it commit to being open about how stakeholder inputs affect decision-making.

Based on Toyota’s 2003 Environmental and Social Report, the Corporate Ethics Committee appears
to have responsibility for ensuring compliance with the Code of Conduct (the document in which the
commitment to external stakeholder engagement is made). Based on publicly available information,
no evidence was found to suggest that training is provided to staff on engagement practices, or that
Toyota have institutionalised the involvement of external stakeholders in corporate decision-making.
As was mentioned above, the Code of Conduct is not disseminated through more than one medium
or available in languages other than English and Japanese.

Member Control
Toyota does not score well in member control, primarily because of the weak shareholder protections
provided by Japanese corporate law. While Japanese law provides shareholders with some rights,
the law stipulates that rights are granted through ‘unit shares’ instead of individual shares. Under this
system, shareholders have one voting right for each unit of shares that they own, where 100 shares
constitute one unit. Any number of shares less than a full unit carry no voting rights, leading to small
shareholders not having the right to vote.

Although Japanese law states that shareholders can nominate candidates to the Board of Directors,
add items to the General Shareholder Meeting’s agenda, and initiate a process of dismissal of a
Board member, the a certain level of share ownership is required to utilize such rights. For example,
to nominate candidates to the Board of Directors requires shareholders to have more than 1 percent
of voting rights or more than 300 voting rights; to propose agenda items requires 1 percent of all
voting rights for over six months; and to initiate a process of dismissal of a Board member requires a
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shareholder to own over 3 percent of voting rights for more than six months. Shareholder must also
have at least one unit share (100 shares) to attend the General Meeting of Shareholders

Toyota’s Articles of Incorporation do stipulate that candidates for the Board of Directors must be
elected through a majority vote.

Evaluation Dimension

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Japanese Corporation Act.
Toyota ranks fourth among the ten assessed corporations for their capabilities for evaluating social
and environmental impact scoring 52 percent.

Toyota makes a strong public commitment to evaluating their environmental impact and has a
comprehensive environmental management system to realise this. The document that guides this
system was not made publicly available, so it was not possible to identify whether it met any good
practice principles. Based on publicly available information, no evidence was found of a similar policy
guiding the evaluation of Toyota’s social impact.

Toyota has an Environmental Committee chaired by the President that oversees environmental
issues. The Secretariat of this committee is the Environmental Affairs Division, which manages action
policies and goals, and drafts environmental action plans and annual company-wide environmental
policies. Evidence in the 2003 Environmental and Social Report suggests that training is provided to
relevant staff on how to implement the environmental management system, and that mechanisms are
in place to ensure the dissemination of lessons and best practices on environmental evaluations.

Complaint and Response Dimension

With a score of 26 percent, Toyota ranks last among the ten assessed corporations for their complaint
and response capabilities.

While Toyota has a compliance hotline for internal stakeholders to report issues of non-compliance,
the policy that guides how these complaints are handled is not disclosed publicly. In this regard, it
was difficult to identify if Toyota commits to good practice principles on complaints handling. There is
reference in the 2005 Environmental and Social Report to the company’s commitment to assure
confidentiality of complainants and the use of an independent outside attorney to run the hotline.
However, no further good practice principles were identified. No evidence was found to suggest that
Toyota have a policy for handling and responding to complaints from external stakeholders.

The Corporate Ethics Committee is responsible for overseeing issues of compliance, while a
secretariat within Toyota deals directly with complaints sent by the independent attorney. Based on
publicly available information, no evidence was found to suggest that relevant staff members are
trained on how to handle and respond to complaints. However, evidence was identified in the 2005
Environment and Social Report indicating that Toyota is working to increase awareness of its
compliance hotline among employees. The company is including information in the pocket edition of
the Code of Conduct for Toyota employees and promoting its use with boards.

Conclusion

Toyota’s evaluation capabilities are the most developed dimension of their accountability, while their
transparency capabilities are the least.

The 2006 Global Accountability Report indicates that Toyota should consider undertaking a number of
reforms. The company should strengthen their commitment to transparency by adopting an
organisation-wide information disclosure policy that identifies what, when, and how information will be
made available and commits to responding to all information requests within a certain period of time.
The disclosure policy should also commit the company to being transparent with all information other
those included in a set of narrowly defined conditions for non-disclosure (e.g. contractual
confidentiality, staff issues etc).

Toyota should also strengthen their capabilities for engaging external stakeholders by making a
commitment to good practice principles on stakeholder engagement, such as identifying the
conditions under which stakeholders can expect to be involved in corporate decision-making, and
being open about how stakeholders’ inputs affect decision-making.

With regard to their complaint and response capabilities, Toyota should disclose the policy that guides
how complaints are handled. The company should also consider allowing external stakeholders to
lodge complaints through the compliance hotline.

Lastly, Toyota should develop a document that guides the evaluation of their social impact.
The 2006 Global Accountability Report assessed the accountability of 30 global organisations from
the intergovernmental, non-governmental and corporate sectors according to four key dimensions of
accountability – transparency, participation, evaluation, and complaint and response mechanisms.
The study investigated the extent to which these organisations have in place the capabilities – policies
and systems – at headquarters or the global office that foster accountability to communities they
affect and to the wider public. At the global level, organisations need to have in place enforceable
policies on key dimensions of accountability in order to promote consistency in approach both at
different levels throughout the organisation and in relation to their diverse stakeholder groups. The
presence of a policy at the global office indicates a public commitment to the dimensions of
accountability and enables stakeholders to demand compliance with these policies; yet how these
commitments translate into practice is equally important. The project team at the One World Trust is
actively seeking innovative ways to assess accountability in practice both at the global office and field
levels. Such assessments will help build a more comprehensive understanding of an organisation’s
accountability.

For a full list of indicators against which each of the 30 organisations were assessed click here or for
further information on the 2006 Global Accountability click here.